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Contracts Keyed to Fuller
Power Engineering & Manufacturing, Ltd. v. Krug International
Citation:
501 N.W.2d 490, Iowa 1993Facts
Power Engineering, an Iowa manufacturer, contracted with Krug International to build a specialized gear box for $149,700. Unknown to Power Engineering, the gear box was ultimately destined for Iraq as part of a human centrifuge for training jet pilots. The parties exchanged forms with conflicting terms: Power Engineering’s quotation stated “ONLY NON-CANCELLABLE ORDERS ACCEPTED,” while Krug’s purchase order included a force majeure clause on its reverse side. The parties had verbally agreed that Krug could cancel the order but would pay for work completed. Power Engineering received only the front page of the purchase order initially and began production. After paying $75,000, Krug directed Power Engineering not to ship the completed gear box following the outbreak of the Gulf War and UN embargo against Iraq in August 1990, citing the force majeure clause. Power Engineering sued for breach of contract, claiming the force majeure clause was not part of their agreement.
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